Upstream and Downstream Strategic Food Safety Interactions

Domestic water consumers in many developing countries boil water before use, presumably concerned about quality control on the part of upstream water authorities. In this paper we investigate strategic incentives for food safety efforts by upstream food processors and downstream consumers. The strategic setting is where food processors move first and consumers react to perceptions about processor behavior. We consider two technological environments in which food safety is assured: i) weakest-link where both processor and consumer behavior must succeed; ii) best-shot where it suffices for efforts by either party to succeed. We study privately optimal behavior under negligence and strict liability rules, and also investigate the role of consumer risk aversion.